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Record Retirement Account Balances - How Diversified Are They?

Retirement Accounts Are Filling up—How Diversified Are They?

John-Rothans

Written by John Rothans

Aug 25, 2021

Perhaps fueled by time at home and stimulus funds, the average balance in Americans’ retirement accounts hit a record for the third straight quarter this year, according to Fidelity. We’ll look at the story and then review how that money is being allocated.

What’s really inside American retirement accounts, and could they be more diversified?

Retirement Account Balances Have Gone up

As of June 30, 2021, the balance in the average 401(k) account at Fidelity had risen 24% from the same time last year. Meanwhile, the average balance for an individual retirement account (IRA) at Fidelity climbed 21% during the same period.

“The pandemic is clearly fueling a shift in how Americans prioritize their work, health, personal lives, and financial well-being, so it’s encouraging to see a continued improvement of retirement savings rates and individuals expressing more feelings of hope and fewer feelings of stress,” says Kevin Barry, president of workplace investing at Fidelity, a major provider of 401(k) plans.

Nonetheless, more than half of all American workers don’t have access to a workplace retirement plan. AARP notes that most workers who do have access to a workplace plan aren’t saving enough for a comfortable retirement.

That tide could be turning, though. A survey this year by Schwab of 401(k) participants found that more than half (53%) say they are very likely to achieve their retirement goals, compared with 37% in 2020. Furthermore, 36% say they plan to bump up contributions to their 401(k), and 35% say they aim to put more money into other types of retirement plans.

What’s in Our Retirement Portfolios?

When Americans save for retirement, where do they put their money? Defined contribution plans like 401(k)s are the no. 1 option, with 54% of non-retirees maintaining this kind of account.

Here’s the rest of the breakdown, courtesy of the Federal Reserve:

  • Savings not in retirement accounts—48%
  • IRAs—33%
  • Pensions—21%
  • Other retirement savings—12%
  • Businesses or real estate—9%
  • No savings—26%

Are Retirement Portfolios Diversified Enough?

As Fidelity explains, portfolio diversification is designed to help reduce the impact of risks and market volatility, not necessarily improve returns. But are Americans’ retirement portfolios diversified enough? In many cases, they aren’t.

A 2019 survey commissioned by CNBC Make It showed that 42% of U.S. adults don’t actively monitor their portfolios to ensure they’re diversified. That could be a money-losing oversight on the part of millions of Americans. And even if people think their portfolios are balanced, they may actually put too much importance on stocks and not enough on alternative assets.

Experts strongly recommend portfolio diversification as a way to protect assets. As such, wealth-minded individuals are encouraged to consider an array of asset types for their portfolios.

These include:

  • Stocks
  • Bonds
  • Cash
  • Precious metals and other alternative assets

Keep in mind that even a typical retirement vehicle like an IRA can contain alternative assets, such as gold, silver, platinum, and palladium. This can be accomplished by setting up a self-directed IRA, enabling you to hold precious metals in your retirement portfolio.

Could your retirement account use a little more diversity? A little more hedging? Talk to an IRA Account Executive about diversifying with precious metals. Call U.S. Money Reserve today for a one-on-one consultation.

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